This photoshopped image has been shamelessly stolen from Something Awful.

Where have I been and what have I been doing?

Well, for the last week or so I have been diverting my online energies to Last.fm, specifically forming a group of Last.fm listeners who like RIDE, my favourite band. So far the group has managed to get 70 people join in the last 8 days.

The tactics I have used are relatively simple. Anyone at Last.fm can create a group and so I created "The Mouse Trap" (the name of our group) on March 21st. I then began to trace Last.fm listeners who were listening to RIDE and invite them to the group.

On Last.fm, every band has its own page, and everyone who subscribes to Last.fm and who listens to music on their PC or mp3 player can "scrobble" their tracks to last.fm, giving each individual their own playlist. Click here to see mine. Of course data from thousands of Last.fm listeners is pouring into the site continually, which also allows you to see who's been listening to a certain band or a certain song. Click here to see who has been listening to RIDE in the last few minutes.

Armed with this knowledge, I visit the personal Last.fm page of every RIDE listener and plonk a message in their "shoutbox". The first message went like this:

Attention. All RIDE fans are ordered to join "The Mouse Trap" group. Failure to do so will lead to global chaos.
http://www.last.fm/group/The+Mouse+Trap+-+Ride+fans

Completely overbearing of course, but when you look at the Mouse Trap page, you'll see this description of the group:

Recent peer-reviewed studies by musicologists have come to the conclusion that RIDE is the greatest band in the history of music. This controversial study is based upon scientifically tested empirical experiments which prove beyond any doubt that RIDE, a one-time "Shoegazing" band from Oxford, England, is many magnitudes superior than any other band in all histories of music, including extrapolations using Quantum mechanics of potential bands that will arise in the future, as well as those that have arisen in alternative universes.

If you have been convinced of these plain facts, then please join our group - The Mouse Trap - which will act as a conduit of truth and harmony towards humankind for centuries to come as RIDE's songs turn our dirty globe into a utopian paradise in which Mark Gardener, Andy Bell, Laurence Colbert and Steve Queralt reign as a Quadrinity, dispensing their wisdom to a world that is still painfully suffering from exposure to too many Spice Girls songs.

So, grasshopper, leave those other groups all behind, come up for air, get stuck in the Mouse Trap and watch your dreams burn down as the seagull leaves a vapour trail across the sky. Just make sure you don't go in a different place, lest you be paralyzed like a daydream and end up nowhere.

So, am I overstating the case here? Of course. But, then again, elevating a mere band to semi-godlike status is quite common, and RIDE lovers I contacted in the Shoutbox seemed to enjoy the description and began joining in droves. One or two people have joined because they were looking for a RIDE group, but most of the (now 70) members joined because I wrote an invitation in their shoutbox.

And when they joined, then what? I would give them this welcome message:

You are now a member of "The Mouse Trap" group and have made the world a better place because you listen to RIDE. Your life is now complete.

After the group passed 50 members, I changed the invite to this (which is what I am using now):

Attention. RIDE fans have been flocking like Seagulls to join "The Mouse Trap" group in order to prevent their Dreams from Burning Down. Please join our group and turn our world into A Different Place.
http://www.last.fm/group/The+Mouse+Trap+-+Ride+fans

As leader of this growing group I've begun to initiate discussions about the group's Last.fm page, giving over important decision making to them (and thus empowering them and increasing their "ownership" of the group). One member runs an IRC channel and is willing to set one up for us so we can converse in real time.

In retrospect, what I have been doing is forming an online community. These are 70 people who don't visit my blog (although some no doubt visit) and we have music, rather than politics, in common. From what I can gather, the formation of the Last.fm RIDE online community has been achieved very quickly in comparison to other Last.fm groups. One group I am a member of, the Warlocks group, has 58 members but has been in operation since August 2005. The RIDE group I have formed is bigger but has been only operating since March 21st 2008.

We'll see how this goes. I'm just enjoying a diversion from politics, economics and the environment and opinionation at the moment.

BTW, if you're a music lover, I seriously suggest you give Last.fm a good tryout. Membership is free and, at the very least, you can listen to some good music streams on your media player.

Mt Pinatubo, June 12, 1991

Name the band competition

Who are these blokes?

Hint: They are *NOT* from the Southern States of America.

Big Hint: "Kick out the Jams m*******rs!".

Answer is here.

Impact events and the subprime fallout

You probably know this already, but occasionally my thoughts on economics delve into flights of fancy. I have thought about, for example, what to do if a meteorite hits the earth and wipes out 99% of the world's population - how would surviving governments react to such a disaster? How would a central bank respond best in such an event?

In the aftermath of such an event, any comparatively well off economy - ie, those which are located on the other side of the world from the impact area - would naturally still be able to function but at a very impaired rate.

Let's say that a meteorite hits the East coast of the USA. The blast and thermal pulse manages to kill off 99% of the world's population. The only remaining and functioning economy is South-Eastern Australia - which is pretty much directly opposite to the East Coast of the USA when you look at a globe. Basically the populations of New South Wales, Victoria and Tasmania have survived intact, while the populations of South Australia and Queensland have been severely damaged. Western Australia, sadly, has not survived, while Darwin in the Northern Territory is pretty much toast (literally).

An emergency cabinet meeting is then convened, with both sides of Parliament represented. Because of my glowing reputation as an economic thinker (ahem) someone invites me to advise the cabinet as to what to do. I walk into the room and the politicians look up. "Mr Cameron", says PM Kevin Rudd, "What are your ideas?"

Well, apart from trying to reduce the size of my cranial capacity (fictional cabinet laughs as they break the fourth wall), the most obvious problem is that the nation's economy, so dependent upon overseas trade, now has to support itself. Everything that Australia's economy needs that was once imported now needs to be made here. With a population now of 15 million (25% wiped out due to the impact event) that would pose a great difficulty. Moreover, Australia's exports are no longer needed. So, on the one hand, we have a massive increase in demand for things we can't make, and a massive decrease in demand for the things we do make and used to sell overseas.

In this situation, GDP will naturally shrink. The country will go into a massive recession. Inflation will also increase markedly - people are panicking and stocking up on basic needs, thus devaluing the currency and encouraging hyperinflation. Millions are likely to lose their jobs and businesses all over the place are likely to go bankrupt.

Well the first thing I would do is get the Reserve Bank to raise interest rates to control inflation. This may seem counter-intuitive, but a functioning economy needs a stable currency. Moreover, as the years of recovery go by, businesses will form that will begin to produce goods that we used to get from overseas. In effect, the economy will begin to rebalance itself - though at a low level.

But the second thing I would do is for the government to take upon itself every single piece of debt left in the economy. All debt - personal debt, household debt and corporate debt - should be transferred to the government. The result of this will be people who no longer have mortgages and businesses that no longer have to pay back loans. This will allow people and businesses to feel more "settled" as they take stock of what is going on. The government, now saddled with massive amounts of debt, will need to take drastic action over the long term in order to pay back this debt (ie tax increases, spending cuts, a combination of the two or maybe even an attempt at the taxless economy idea I have developed). This won't solve all the problems, but it will allow the government to take up a lot of the economic pain inflicted by the impact event.

Of course there are other problems that need to be solved as well - namely, how to survive without much sunlight over the next 10-20 years; how to deal with the massive injuries sustained by survivors; how to battle the newly awakened race of super-intelligent reptiles whose ancient underground city was located directly underneath the impact site... and so on.

But let me bring this fantasy back to reality here. Personally I think that the subprime mortgage crisis hitting America should just be let to burn itself out. But what if it gets really, really bad? And by bad I mean a few magnitudes worse than what we're likely to experience over the next 12-18 months?

And although it would be great if the US of A suddenly adopted Absolute Price Stability and my Taxless Economy idea, I need to be realistic. Is there anything that the US government could, in fact, do?

Well here's a thought - why not buy all the mortgages? Not just mortgages in trouble, not just mortgages that have been foreclosed - all mortgages. This won't simply be the government buying everyone's house, but simply the government paying off everyone's mortgages.

And where would the money come from? Well, it could probably come from the Federal Reserve - they print it and create it using seigniorage, give it to Congress, who then use it to pay off the mortgages of every American.

But of course such a move is inflationary. In fact it would probably be hyperinflationary. So what would be the point? Well, for starters, the Federal Reserve could increase interest rates to contain such a massive increase in the money supply. It could also increase the Reserve Requirement and even apply it to M3 rather than M1, thus removing more money from the economy and, via the mechanics of the money multiplier, prevent money creation "down the line".

The result of this would be a balancing act. On the one hand, a certain market in the economy - the housing market - is saved. On the other hand, the entire economy takes a hit with higher interest rates. It's a way of transferring a deadly hit on one section of the economy into merely a painful punch on the economy as a whole.

But my idea here of paying off people's mortgages doesn't have to extend to paying it all off. It could simply mean that the government pays off a substantial amount via money creation - say between $50,000 and $100,000 per mortgage - and rebalances it via high interest rates. That won't be enough to save every mortgage or lender, but it will affect that sector of the economy positively. Rather than throwing money at big businesses like Bear Sterns, the money gets thrown at mortgages which eventually find their way back to the big businesses over time. Rather than just benefiting businesses, households AND businesses benefit.

Of course, such a proposal is fraught with risk. If it happens this time around will it happen again? Is it really the government's job to act in such a radical fashion? And although this is an idea of mine, I'm not certain that it should be implemented - barring impact events of course.

And then there's the basic theory behind this idea - will it work? Will printing money and then raising interest rates really be balanced out? And surely this idea has its roots in my own Taxless economy proposal? Guilty as charged.

A Food crisis is emerging

From the department of what is going on:

Egypt's government is struggling to contain a political crisis sparked by rising world food prices. Violent clashes have broken out at long lines for subsidized bread, and the president, worried about unrest, has ordered the army to step in to provide more.

The crisis in the world's most populous Arab country and a top U.S. ally in the Mideast is a stark sign of how rising food prices are roiling poorer countries worldwide. The World Food Program on Monday urged countries to help it bridge a funding gap in food assistance caused by higher prices.

I keep hearing occasional stuff about this and I'm wondering what is going on. Amartya Sen, a well known economist with a focus on poverty, has written reasonably conclusively that famine often arises when the food distribution system is damaged or has collapsed, resulting in both a famine and stocks of food unable to be directed where it is most needed.

But this is Egypt. Egypt is no longer a third world nation and has not suffered a famine for a long time (though they did in Old Testament times). What is going on?

Busy

Doing something else at the moment. Will return to blogging shortly! Don't go away just yet!

New Charlatans Album

Now available for FREE download here. I'm downloading it as I type, so I don't know what sort of file format it is or whether it is good or not, or what sort of copyright it carries. It's titled "You Cross My Path".

It has been available now for 3 weeks - so the band must have distributed it online around the same time as Nine Inch Nails' Ghosts I-IV.

This photoshopped image has been shamelessly stolen from Something Awful.

China, Tibet and the Olympics

Ah yes. Tibet. Scourge of China and the interests of Richard Gere alike. What to do?

What should NOT happen is a boycott of the Olympics. It's not that I somehow think that China needs to be appeased or that the Tibetans don't somehow need justice. Sometimes boycotts are necessary, although the last two - 1980 and 1984 - were hardly effective and were conducted more out of spite than anything.

The problem I suppose is, firstly, the belief that the "side" I am on, namely the English speaking industrialised world, is hardly occupying any moral high ground. And this not just in terms of older history (ie Australia's treatment of Aborigines, America's treatment of their indigenous people, Britain's treatment of pretty much everyone) but also in recent history. If I'm going to argue for a boycott of the Beijing Olympics then I should also argue for a boycott against the countries that have invaded Iraq as well, including my own country.

In short, there a multitude of reasons for boycotting the Olympics or getting angry that certain nations are going to be there. That being the case, in theory no one should go.

The second problem, though, is more along the practical side of things. Boycotting the Olympics will not somehow soften China's resolve in Tibet. The Chinese government is not going to suddenly make Tibet free, recognise Taiwan as a sovereign country and turn into a western style democracy because a bunch of westerners decided not to attend a glorified sporting event.

What might hurt, though, is economic sanctions, though I would point out that any trade embargo against China would hurt America more than China, so that's out as well. Moreover it is inflammatory, and that is not what is needed.

We need to remember that the best sort of change is achieved slowly and carefully. Change is not wrong - in fact change is an essential part of how societies work. What hurts the most, though, is when change comes suddenly.

Take Iraq under Saddam. Saddam was a brutal dictator, but invading the country and destroying the nation's power structure has created anarchy and done far more harm to it than anything Saddam would have done.

Dealing with rogue states - and even states like China that have roguish elements - requires patience and time. Look at nations like Egypt, Syria and Libya - these nations are hardly examples of world's best practice, but they have moved over the years from being potentially bad states to being potentially good states. This should have been the goal with Iraq, and it should have been the goal in Afghanistan from the late 1980s onwards. It's also the goal we should have towards Iran, though I would argue that Iran is less a rogue state than it was in the 1980s.

Look at the problem with Cyprus. Both Greece and Turkey have been arguing over this Mediterranean island for decades and have occasionally come to blows. Yet the moderating effect of the European Union has forced both sides to make concessions and to approach this issue - which is hardly solved yet - slowly, carefully and effectively. As time passes, issues like Cyprus will lose its ability to stir up base emotions and a solution will eventually be found.

The same can be said about China and its problems with Tibet and Taiwan. Slowly, slowly is the best way. It is the most effective way. Oftentimes the best solution is not to be found in the flag of victory waving over a bloody battlefield, but in the bored looks of those examining the "small print" of agreements.

New Tag Category

It will be called "failed predictions" for obvious reasons. Thus you can keep up with my failures as well as, well, other things...

Font changed

Do people have any problems with this font?

Last.fm is interesting. Reason #1

You listen to a song, say The Queen is Dead by The Smiths, then check out the song at Last.fm and discover that some 20 year old woman in Sweden has just listened to it to at the same time.

This photoshopped image has been shamelessly stolen from Something Awful.

Squeezing blood from stone

The latest oil production figures have been released at The Oil Drum. I'll only do a few graphs here. If you want to look at all the graphs then click here.

Comment: "Liquids" includes crude oil and liquefied natural gas, along with unconventional oil sources. As you can see, "liquid" production is increasing but nowhere near as fast as 2002-2004.

Comment: This is the clincher. This is evidence that the "Peak" has been reached. Yes, oil production has increased in recent months but has yet to exceed the 2005 level (see The Oil Drum article for more detail on this). New oil fields have been coming online in recent months too so production may even "peak" anew. If Peak Oil is correct (and it is) one phenomenon in oil production will be a plateau followed by a long, slow, downward slide. You can easily see that happening here.

Comment: US Oil production figures since the early 1970s are empirical proof of Peak Oil. Here we see US oil production figures declining. Why? Because the US Peak was reached in the early 1970s and has been declining ever since. Note the mid 2005 downward spike - that was Hurricane Katrina.

Comment: The North Sea oil fields are now looking quite empty, and production levels are tapering off alarmingly. If the rate of decline between 2002 and 2008 continues, the UK will be producing around 0.55 million b/d in 2014.

Comment: You can guess why a massive downward spike in Iraq occurred in 2003. What is interesting is that the Iraq oil production figures are less than half that of the US. There's no way that more oil can be extracted without new infrastructure built, and that will be difficult in the current and future environment there.

Comment: Saudi Arabia - and thus the Ghawar field - is in decline here. Saudi Arabia is the world's largest oil producer and has the largest oil fields... and they're now in decline.

Christ's death - for sins or for (insert problem here)?

Over at The Boar's Head Tavern, Travis Prinzi, writing about Black Americans and their lower socio-economic status, says this:

But what that change looks like, I still don’t entirely know, except that I know it needs to be rooted in the death of Jesus for all tribes, tongues, and nations - and not in the American Dream’s “myth of meritocracy,” nor in the welfare-state and unfounded optimism (detached from the hope of Christ) of the so-called “progressives.”

What Travis is describing in his extended post is his struggle to come to terms with his conservative upbringing (which pretty much argued, and I quote, “racism is over, black people need to just not be lazy”) and his current position of being in urban ministry and ministering the Gospel to black folk.

Having already seen his conservative beliefs on this issue challenged to the point where he has jettisoned some of them, Prinzi is unsure of where to go. What will bring Black Americans out of their low socio-economic position in American society? What will it involve? Well, he says, whatever it will be it will be "rooted in the death of Jesus".

Whoa. Hang on there. Is he seriously suggesting that the only solution for black America's situation is Jesus? Hmmm. If I disagree with such an assertion I might sound terribly unchristian. So let me extrapolate a little.

The idea that Jesus' death on the cross is the ultimate answer to any and every question has some truth in it. Christians believe that our world is beset by sin and that all problems have their ultimate root in the spread of suffering and evil emanating from Adam's original sin in the Garden of Eden. Christians also believe that Jesus came to earth and, through his death and resurrection, defeated death and solved the problem of sin through faith in his atoning death. That's what Christians believe, and it's what I believe too.

But to suggest that Jesus' death is a meta-answer to all the world's problems NOW is different from saying that Jesus WILL BE the meta-answer to all the world's problems. A man with a broken leg needs to be told the Gospel, but he also needs his leg mended. His acceptance of the Gospel will not heal his broken leg.

Christians need to understand that accepting Christ as saviour and Lord is NOT necessarily going to lead them to greater prosperity, it will NOT necessarily make them happier, it will NOT necessarily make their family relations better, it will NOT suddenly cure them of illnesses or addictions.

To my shame, I made this mistake many years ago as a young Christian in my early 20s. At the time, a cousin of mine approached me about his impending divorce and needed advice. He was hurting. He had children and the kids were going to hurt bad as well. He wanted to share his experiences with me. In return I basically told him that he needed to accept Jesus as Lord and Saviour and everything will begin to work out right. Of course he didn't take up my offer, and we haven't spoken of this matter again. He ended up getting divorced (it was always going to happen with or without my input). Rather than provide any practical help - like offering to mind his kids or something like that - all I did was earnestly and naively tell him something that was simultaneously unhelpful and unbiblical.

It is possible that many problems in this world have solutions in this world. God has used developing technology to help our world enormously. Vaccines have prevented many horrible viral outbreaks; Sewerage systems have prevented many bacterial outbreaks because of better hygiene; Electricity provides heating in winter and cooling in summer, making our lives more pleasant and saving us from the dangers of temperature extremes.

Of course, it is true to say that Jesus is ultimately the answer to all these problems - sicknesses and plagues will no longer exist once a Christian resides on the new earth, as won't the dangers posed by extreme temperatures or lack of a sewerage system. Yes, Christ is the answer. But if an entire society accepts Jesus as Saviour and Lord, that will NOT protect them from viral or plague outbreaks or deaths resulting from very hot summers or very cold winters. At least, they won't be protected this side of the return of Jesus.

Seeing the death and resurrection of Christ as the meta-answer for everything is true in some respects, but it will not put food on your plate or provide you with paid employment or keep you warm when the temperature drops below freezing.

Travis Prinzi is right to focus on the cross of Christ - that is appropriate and correct. But having him say that the only solution for Black Americans to improve their socio-economic status can only be found in Christ is a little bit like saying "there is no answer, only Christ, so let's do nothing except preach the Gospel".

Preaching the Gospel is, of course, the role of the church. It is not the role of the state, nor is it the role of communities. Christ's death is not going to fix my broken leg or put food on my plate or create better employment conditions or remove carbon from the atmosphere or put more liquid hydrocarbons into the ground or make my home more valuable. Christ's death is for sin, it is not for fixing up the world's issues now.

I think there are solutions to many of the world's problems that can be found in our own world. This is not some Christ-denying heaven-on-earth utopia but simply an understanding that problems can be fixed. Broken legs can be healed, people's plates can be filled, global warming can be averted and socio-economic problems with Black Americans can be solved - and they can be solved without Christ.

Sin, however - the thing that cuts us off from God and is the reason why our world suffers so much - can ONLY be addressed by Christ's death and resurrection. Healing broken legs and fixing global warming will get no one to heaven.

Christians should, of course, focus upon Christ and the preaching of the gospel. They should not see the Gospel, however, as being the sole solution to the problems of sin that occur this side of the return of Jesus. The Gospel will lead to eternal life, but it won't magically put food on your plate. The Gospel will lead to a future where there is no more tears or pain, but it won't magically heal your broken leg now or cure emotional or psychological wounds now. The Gospel will lead to a future where God's people will live in paradise on the new earth God promised - but it won't magically stop global warming.

On this side of the return of Christ, Christians should act to preach the gospel to unbelievers - but they should pray that God blesses our world with prosperity, health, safety and abundance. These qualities don't magically appear through the preaching of the Gospel, they are a result of God blessing our world through the use of market economies, businesses, individuals, families and governments. They are a result of God's universal grace towards all mankind, rather than a result of his specific grace that he grants those who respond to the Gospel with repentance and faith.

If we as Christians wish God to continue blessing the whole world through his universal grace while he also blesses the world by bringing unbelievers to repentance and faith, then we should preach the gospel to unbelievers while also praying that God blesses our world, while also seriously considering how markets, individuals, businesses, households and governments can function best to provide a better life for all on this side of the return of Christ.

This photoshopped image has been shamelessly stolen from Something Awful.

A "Bear Market" will be announced within days

What was the result of Helicopter Ben's interest rate cut and the demise of Bear Stearns? Well, he announced it on a Sunday, so no results from the market yet.

Here in the Asia-Pacific, however, the reaction was overwhelmingly negative. The Australian Sharemarket (ASX 200) dropped by 2.3%, which was pretty good compared to the 4.01% drop in Hong Kong and the 3.71% drop in Japan.

All this means, of course, that the chances of a drop in the sharemarket on Wall Street are quite high. And if the shares fall far enough, a "bear market" may be declared - maybe not on Monday but probably some day this week.

A "bear market" is when a sharemarket index has dropped by 20% from its previous high. My preferred index is the Wilshire 5000, which peaked last year at 15,806.69. It closed last Friday at 12,992.93. In order for a bear market to be declared in the Wilshire 5000, the index has to drop below 12,645.35. In order for that to happen in the next few days of trading, Friday's close has to decline by a mere 2.68%. Considering the falls today in Tokyo and Hong Kong, such a one day decline is very possible - if not before the end of the week.

The Wilshire, of course, pretty much follows the Dow Jones Industrial Average and the S&P 500 in terms of peaks and troughs. Bear markets will be declared there as well.

Yes, that's a prediction.

Today's xkcd

I'm a Christian, which means that I believe in the supernatural. Nevetheless I have to agree with the message of this comic strip. So many mistakes of human behaviour - including ones by politicians that can result in the deaths of millions - can be traced to an inability to challenge assumptions.

Examples would be: The Common Cold (belief that a chilly environment can cause a cold), the Iraq War (in which clear absence of WMD evidence eventually proved to be evidence of WMD absence) and various other urban myths.

Fed cuts rates. Forex markets cut dollar

For every action...

The Federal Reserve, struggling to prevent a meltdown in financial markets, cut the rate on direct loans to banks and became lender of last resort to the biggest dealers in U.S. government bonds.

In its first weekend emergency action in almost three decades, the central bank lowered the so-called discount rate by a quarter of a percentage point to 3.25 percent. The Fed also will lend to the 20 firms that buy Treasury securities directly from it. In a further step, the Fed will provide up to $30 billion to JPMorgan Chase & Co. to help it finance the purchase of Bear Stearns Cos. after a run on Wall Street's fifth-largest securities firm.

``It is a serious extension of putting the Federal Reserve's balance sheet in harm's way,'' said Vincent Reinhart, former director of the Division of Monetary Affairs at the Fed and now a scholar at the American Enterprise Institute in Washington. ``That's got to tell you the economy is in a pretty precarious state.''

The move is Chairman Ben S. Bernanke's latest step to alleviate a seven-month credit squeeze that's probably pushed the U.S. into a recession. The dollar tumbled to a 12-year low against the yen and Treasury notes rallied as traders increased bets that officials will reduce their main rate by 1 percentage point when they meet tomorrow.

There is an equal and opposite reaction.

The dollar fell the most in eight years against the yen as growing concern about widening credit- market losses was heightened by a Federal Reserve cut in the discount rate, and the sale of Bear Stearns Cos. to JPMorgan Chase & Co. for one-tenth of its value from a week ago.

The dollar dropped to a record low against the euro and the Swiss franc as the Fed made its first weekend change in borrowing costs since 1979. Traders increased bets the Fed will slash its benchmark target rate by 1 percentage point tomorrow, making U.S. assets less appealing.

``The dollar is facing a credibility crisis,'' said Koji Fukaya, a senior currency strategist at Deutsche Securities, the Tokyo unit of Deutsche Bank AG, the world's largest currency trader. ``All the markets are entering a vicious cycle.''

I'm wondering here whether Ben Bernanke does has a hidden strategy, rather than groping blindly in the dark.

By reducing interest rates, Bernanke is essentially creating more money. While such money creation is inflationary, it is pretty much going to rescue Wall Street investment companies that are bleeding red ink. So, on the one hand, Bernanke is rescuing financial businesses in trouble, but on the other hand he is doing this by creating inflation, thus transferring the pain from one sector of the economy to the economy as a whole. In other words, he is broadening the pain.

I'm not sure if this is wise. Bernanke is obviously hoping that the deflationary effects of the subprime meltdown will balance out the inflationary effects of money printing. What Bernanke seems to have forgotten is that the Forex market has a say in all this as well, and that the devaluing dollar will have an inflationary effect too. Moreover, such an act is essentially a form of corporate welfare - is it really a good idea to save companies who have made bad financial decisions?

This whole subprime meltdown is creating a huge economic mess. Bad policies by the US Federal Reserve will only make things worse.

Mercy Ministries in trouble

From the department of church and state not separate:

They call themselves the Mercy Girls. And after years of searching they have found each other.

Bound by separate, damaging experiences at the hands of an American-style ministry operating in Sydney and the Sunshine Coast, these young women have clawed their way back to begin a semblance of a life again.

Desperate for help, they had turned to Mercy Ministries suffering mental illness, drug addiction and eating disorders.

Instead of the promised psychiatric treatment and support, they were placed in the care of Bible studies students, most of them under 30 and some with psychological problems of their own. Counselling consisted of prayer readings, treatment entailed exorcisms and speaking in tongues, and the house was locked down most of the time, isolating residents from the outside world and sealing them in a humidicrib of pentecostal religion.

This is a very damaging news report. I have heard a lot about Mercy Ministries - they are an arm of the Hillsong church in Sydney's North West.

The fact that a report has come about detailing alleged abuse is not surprising to me. Within the church today - especially amongst Australian Pentecostal or Charismatic churches - there has developed a "semi-cult" mentality that is not truly part of biblical Christianity. This mentality has resulted in many damaged lives.

This is not to say that Hillsong, Mercy Ministries or Australian Pentecostal churches are some gigantic cult trying to harm people. Such an idea is rubbish. What I am saying is that there are tendencies in these groups to have controlling behaviour.

I have no doubt that there are many women who have been helped by Mercy Ministries... and I also have no doubt that there are many women who have been harmed by it. This is not as strange as it seems. Throughout recent history - pretty much since the early 1970s - new religious movements within Christianity that evolved out of societal change have tended to develop very authoritative structures. This has been felt in, for example, Youth With a Mission and Jesus People USA, over many years. Moreover, churches like The Potter's House have also developed similar controlling behaviours. All of these groups have well documented cases of abuse and control - but also people who have benefited greatly from their work.

What is different about this issue is that, from what I understand, Mercy Ministries is both a charitable organisation that advertises in the Gloria Jean's coffee shop chain (which is owned by Nabi Saleh, a member of the Hillsong Church), and receives some form of federal government funding for the welfare work they do.

That tales of abuse should be present in Christian organisations is one thing - that such tales of abuse should come from a charitable and government-funded organisation is another. If these allegations prove true, it will bring the matter of the separation of church and state here in Australia to a head. After all, if an organisation receives money from the "world", shouldn't they have to run by the "world's" rules? Moreover, are people giving charitably to an organisation whose religious beliefs do match those of the giver? It would be like me - an evangelical Christian - giving charitably to an Islamic welfare group whose first priority would be to convert its clients into Muslims.

These reports are disturbing. They have not been created out of thin air by Christian-hating reporters in the media. There is obviously some truth in them, and there needs to be a further investigation.

This photoshopped image has been shamelessly stolen from Something Awful.

Unemployment, Recessions and Monetary Policy

Okay, first look at this graph:

This is another FRED graph, courtesy of the St Louis Fed. The blue line represents the unemployment rate while the red line represents year-on-year GDP growth. As you can see there are some interesting relationships.

It doesn't take an (economic) Einstein to tell you that unemployment rises whenever GDP drops - it is one of the most obvious relationships in economic history and one that is borne out quite clearly in the graph above. Moreover, as I pointed out in a previous posting, unemployment in recessions rises quite suddenly and then tapers off slowly as the economy recovers.

Let me put it another way: Downturns lead to very sudden spikes in unemployment; recoveries lead to a slow and steady decrease in unemployment.

This is an important piece of economic data, because it teaches us that, while a definite relationship between GDP and employment exists, the relationship does not have an equal result. During the recession and recovery period, GDP drops then recovers again, and may even exceed GDP levels prior to the recession - yet this occurs while unemployment levels remain higher than what they were prior to the recession.

This graph, again from the St Louis Fed, shows what I am talking about:

Because of the way the graph is designed, the unemployment data appears different to the first graph but is exactly the same. What is different is that the GDP figures are now measured in chained 2000 dollars (which takes inflation into account) rather than the year-on-year GDP growth of the first graph.

Look at the 1979 and early 1980s "double dip" recession. What do we see here? The first thing to note is that US GDP at the beginning of the 1979 recession was lower than at the end of the early 1980s recession. In other words, the US economy had a net expansion - albeit a small one - that spanned these two recessions. Yet unemployment, which was 6% at the beginning of the 1979 recession, reached 10.8% when the second recession was over.

So. We have a situation in which there was net economic growth alongside a considerable increase in unemployment. Why?

The issue is not the fact that there was net GDP growth - the issue is that GDP growth during this period (1979-1982) underwent a series of contractions (whereby GDP actually declined). It is these contractions which have the effect of causing large spikes in unemployment.

I would argue, therefore, that the best conditions for creating steady employment over a long period is not to increase GDP growth, but to prevent economic contractions. The longer the period between contractions, the more stable the labour market is and the less unemployed people there will be.

Of course, this is not to say that GDP growth isn't important - it is. Moreover, preventing an economic contraction logically assumes that GDP should grow.

What I am suggesting, though, is that GDP should never be allowed to grow too fast. Growth must be sacrificed in the short term in order to allow growth over the long term. Moreover, short term growth must be sacrificed in order to prevent a contraction later.

For those whose study of economics takes into account the importance of social justice, economic growth must not become an end it itself. In other words, increasing output, while important, should not be the sole outcome. Any form of economic growth must result in higher standards of living for the people who live in the economy - including those whose contributions are not as great as others.

From a macroeconomic perspective, therefore, progressive economists should embrace any system or policy that will prevent contractions while allowing room for slower-paced economic growth.

Here's one: Absolute Price Stability.

Yes you were probably waiting for my solution, probably even waiting for that one.

Absolute Price Stability (APS) is an alternative form of monetary policy to the inflation targeting practised by most central banks. Rather than trying to keep inflation under 3% (which is the policy of the Reserve Bank of Australia), APS involves the central bank keeping prices completely stable over the course of the business cycle. In practice, this would mean having neither inflation nor deflation. Of course, prices go up and down all the time - but whenever inflation rises it means that prices are going up more and down less. Deflation, of course, has an opposite effect. Moreover APS is not some pseudo price fixing law - prices can go up and down as much as the market dictates. However, for APS to run effectively, the market's ability to affect prices must have a neutral - rather than inflationary or deflationary - effect.

But in order to maintain Absolute Price Stability, central banks must essentially set their inflation targets to zero ("zeroflation") and work hard at maintaining that goal. In practice, this means that interest rates will have to increase while inflation drops to zero. While small amounts of inflation or deflation may be tolerated in the short term, the overall long term goal is to have prices remain where they are. Rather than measuring inflation via the traditional CPI, inflation could be measured as the number 100 in an index. If Absolute Price Stability is achieved on, say, 1 August 2010, then the index would read 100. As inflation or deflation is experienced, that number will go up or down slightly (eg 99.85, 100.25). The long term goal for central banks, however, would be to keep the index at 100, with monetary policy (the raising or lowering of interest rates) being used to achieve this.

So what has Absolute Price Stability got to do with preventing contractions?

Well, since APS requires that interest rates remain relatively high in order to keep inflation low, the natural effect upon the economy would be to dampen economic growth. Rather than investing in shares or in property, or spending money to buy consumer goods, people are more likely to save money. Why? Because they will be in an environment with higher than usual interest rates - the high interest rates reward those who put their money into savings accounts. Keeping money stored in savings accounts and term deposits gives households and businesses a "buffer" against any unforeseen events. Moreover, it means that companies who employ people are more likely to have a cash buffer protecting their business and thus the job security of its employees. Together, this means that both households and businesses have their own form of safety net in case of problems.

To be sure, such practice will hardly speed up the economy in the short term - and that's exactly the point. Any economy who practices Absolute Price Stability will discover that the first few years will be hard. Moreover, the most obvious short term effect of APS will be a dampening of economic activity - even a recession - as higher interest rates begin to bite. It also means that any recovery will be rather slow. From that point on, however, Absolute Price Stability - which is essentially a contractionary policy to start with - will ensure that the economy grows at a slow and steady rate while unemployment drops at a steady rate as well. This process is pretty much covered by Keynesian economics.

It may seem strange that I am advocating a policy that will cause an economic downturn and result in higher levels of unemployment. It may seem even stranger that my reason for advocating this policy is to protect employment. But the reason is that APS is a dynamic policy that results in a downturn first and a sustained recovery later; it results in higher unemployment first and then long term low unemployment later. It is the sacrifice of the now to ensure that the future is better prepared for.

APS will, all things being equal, prevent the economy from contracting - and thus keep the economy running well enough to provide long term job opportunities. Will APS erase contractions enitrely? Will it remove "peaks and troughs" in economic growth? All things being equal, APS will, I believe, be able to achieve this. However, any form of supply shortages (such as oil) will cause the economy to contract, in spite of the practice of Absolute Price Stability. Thus all things are not really equal, although I would still argue that maintaining zeroflation is essential even if the economy is contracting due to any supply shocks.

I need to point out that zeroflation is not deflation - it is simply keeping prices stable, neither rising nor falling. Nor will APS necessarily result in a static or declining money supply - zeroflation is essentially supplying exactly enough money as the economy demands, no more (inflation) and no less (deflation). Zeroflation is quite achievable in an economy in which the money supply is growing.

The only country that has managed to experience zeroflation is Japan, and that only after their mid 90s "long recession", which included a period of destructive deflation. Since Japan's recovery, GDP growth has been quite modest compared to other nations, but their unemployment rate has remained low (and at around 4% is lower than the US) and the standard of living remains high (as shown by GDP per capita - US$33,800 in 2007 - and a high placing in the United Nations Human Development Index). Yet despite the fact that Japan's society is benefiting from its zeroflation economy, many in the US continue to believe that Japan's economy is a "basket case" and is unable to grow at its full potential. (The fact that Japan's economy has long recovered from its 1990s recession seems to have eluded many American commentators).

This combination of zeroflation and low growth has allowed Japan to have a more sustainable economy that has provided long term jobs for its people. While the Japanese are hardly choosing zeroflation (it has essentially been forced upon them by circumstances and does not exist by design) and while the economy still has some major imbalances (namely massive public debt), current economic conditions are reasonably good. Of course, this is not to say that exogenous factors won't affect them - they export to the US so they will obviously feel some pain from the US recession - but their current zeroflation environment will help them cope with any changes they will experience.

At this present time, monetary policy is being questioned. Here in Australia the Labor government has vowed to cut spending in order to control rising inflation, a move back to pre-1996 behaviour whereby Australian governments would aim to use fiscal policy as the way of attacking inflation, rather than the Howard years of paying off debt and leaving it to the Reserve Bank to control prices. In America, the Federal Reserve under the chairmanship of Ben Bernanke seems to have jettisoned any concern about inflation altogether and seems to be trying to create as much money out of thin air as possible in order to prevent a recession. Meanwhile the European Central Bank continues its strict anti-inflationary policies inherited from its immediate predecessor, the Bundesbank, all the time while European unemployment levels remain stubbornly high in comparison to other industrialised nations.

With inflation rising worldwide and economic stagnation a certainty, many will wonder at what influence central banks will have in the future to influence the economy. I don't think it is time to ditch the lessons we learned from the 1970s just yet - strong, independent central banks with an exclusive focus on price stability are more important that this generation realises. If Absolute Price Stability is to be introduced, these central banks need to be trusted more, not less, than what they are now.


© 2008 Neil McKenzie Cameron, http://one-salient-oversight.blogspot.com/

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We're Number 2! We're Number 2!

From the department of hubris and schadenfreude:

The U.S. economy lost the title of "world's biggest" to the euro zone this week as the value of the dollar slumped in currency markets.

Taking the gross domestic product of both economies in 2007, the combined GDP of the 15 countries which use the euro overtook that of the United States when the European currency surged to a record high of more than $1.56 per euro.

"The curious outcome of breaching this latest milestone is that the size of the euro zone's annual output has now exceeded that of the U.S.," the economics department of Goldman Sachs, the Wall Street investment bank, said in a note to clients.

Taking official estimates of 2007 GDP -- $13,843,800 billion for the United States and 8,847,889.1 billion euros for the euro zone -- the economy of the latter passed the United States once converted into dollars, shortly after the euro topped $1.56.

The dollar sank to $1.5688 per euro late in European trading hours on Friday, at which rate the euro zone's 2007 GDP equates to $13,880,568.4 billion.

The 2007 GDP estimates are as published by the U.S. Commerce Department's Bureau of Economic Analysis and provided to Reuters on request for the euro zone by Eurostat, the European Union's statistics office.

Of course this is not the whole story - GDP per capita and median income are important measurements as well and both of these would be superior in the US than in the Eurozone at the moment. The Eurozone has a lot more people - 320 million compared to 303 million - and plans to increase the size of the zone will bring a number of poorer nations into the EU, thus lowering average GDP per capita even more.

What this report does highlight, however, is the way in which the US dollar's fall has affected America's standing throughout the world. The Dollar has been so high for so long that an entire generation of Americans are unaware of the impact of the Dollar's fall. This comparison of GDP is not simply a mathematical quirk, it will affect the standard of living of every American. This will be felt either through the stubborn presence of inflation (which reduces everyone's ability to purchase goods and services) or through higher-than-average interest rates which will act to dampen any economic recovery that occurs.

Warm enough for me

The weather here in Eastern Australia has been quite pleasant.

After a sunless and wet summer we have finally moved into Autumn. March is the wettest month of the year here in Newcastle, but there hasn't been many storms or weather systems doing anything major in the last two weeks.

The days have been getting up into the late 20s - perhaps even 30°C (86° F) out at Metford where I have been working lately. But with the sun setting earlier our nights have been dropping to around 14°C (57° F), which means that our sleep is pleasant and the stored heat in our houses cools faster. In short, while the middle of the day can be quite warm, the rest of the day is very pleasant.

So for my Northern Hemisphere readers, you might be rather jealous at this point, having to endure your horribly cold winters... but remember Spring has sprung and it will get warmer. Winters here in Oz get nowhere near as cold (Newcastle is 6.4 - 17.0°C in July, which is 43.5 - 62.6°F).

This photoshopped image has been shamelessly stolen from Something Awful.

Oil $110

From the department of yawn:

Oil steadied near a record above $110 on Thursday, as investors weighed the dollar's weakness against bloated U.S. crude stocks.

U.S. crude for April delivery fell 31 cents to $109.61 a barrel by 3:03 a.m. EDT, hovering below the all-time peak of $110.20 hit on Wednesday, the sixth straight record high.

London Brent crude fell 49 cents to $105.78, off the record $106.45.

"We're looking at the U.S. dollar, we're looking at speculation, we're looking at geopolitical. Those three things tying together are defying fundamentals," said Peter McGuire, managing director of Commodity Warrants Australia.

"The price of oil is defying fundamentals" is another way of saying "My preconceived notions as to the way things operate continue to be proven wrong".

McGuire, like so many in the oil market, are completely ignorant of Peak Oil and the limitations it places on oil production. These people, who control billions of dollars and who control the market for oil, have no idea of what is going on.

The market is a powerful force when it has reliable and correct sources of information. When it acts are based upon ignorance, it can be terribly destructive.

US to mint $2 coin

And it will look like this:

The U.S. currency also dropped to $2.0191 against the U.K. pound from $2.0064 before Chancellor of the Exchequer Alistair Darling delivers his first budget statement to Parliament at noon in London today. - Bloomberg

Food prices - why so high?

Food prices around the world - especially for basic foodstuffs like grains - have been skyrocketing in price. Why?

Hold on to that thought. Here's Ban Ki-moon, the Secretary-General of the United Nations:

The price of food is soaring. The threat of hunger and malnutrition is growing. Millions of the world's most vulnerable people are at risk.

An effective and urgent response is needed.

The first of the Millennium Development Goals, set by world leaders at the U.N. summit in 2000, aims to reduce the proportion of hungry people by half by 2015. This was already a major challenge, not least in Africa, where many nations have fallen behind. But we are also facing a perfect storm of new challenges.

The prices of basic staples -- wheat, corn, rice -- are at record highs, up 50 percent or more in the past six months. Global food stocks are at historic lows. The causes range from rising demand in major economies such as India and China to climate- and weather-related events such as hurricanes, floods and droughts that have devastated harvests in many parts of the world. High oil prices have increased the cost of transporting food and purchasing fertilizer. Some experts say the rise of biofuels has reduced the amount of food available for humans.

...

This is the new face of hunger, increasingly affecting communities that had previously been protected. Inevitably, it is the "bottom billion" who are hit hardest: people living on one dollar a day or less. When people are that poor, and inflation erodes their meager earnings, they generally do one of two things: They buy less food, or they buy cheaper, less nutritious food. The result is the same -- more hunger and less chance of a healthy future. The U.N. World Food Program is seeing families that previously could afford a diverse, nutritious diet dropping to one staple and cutting their meals from three to two or one a day.

Some interesting ideas there from Mr Moon.

To be honest, a world-wide increase in food prices was always "on my scanner" as it were, since the price of oil would naturally affect food production world-wide. What I didn't expect, though, was prices going so high so quickly.

Of course, with a devaluing US Dollar, all commodities that use that currency in international trade would naturally increase in price. The problem, though, is that the price of food (as well as oil) has increased way beyond the range you'd expect if it was just currency problems.

From an economic point of view, there are a number of reasons why food prices have increased:

1. There is increased demand. This means that the world is demanding more food and the world's farmers are struggling to keep up with this demand. Certainly there has been no massive and sudden increase in world population in recent times, so this increase in demand may be coming from people who have decided to increase the amount of calories they consume. Mr Moon suggests China and India are driving this demand. The good news is that this sort of price increase will eventually cause its own solution - prices will drop when people can't afford to purchase the goods any more. The bad news is that the people who decide to cut down on their food intake may be the very people who can't afford to, namely the "bottom billion." An increase is food production will help rectify this situation, but that assumes, of course, that the grain market will function the way a market is expected to. If food producers are unable to increase their yield, the problem will go deeper.
2. There is speculation going on. This means that the people around the world with lots of money have decided to buy up stocks of food and keep them in the hope that they can sell it at a higher price. Speculation exists in every market, but one of the natural results of speculation is that the goods being speculated upon begin to pile up somewhere. If the world's food market is suffering from speculation, then somewhere there is a lot of food that is not being eaten. So far, I have not heard any reports of massive grain stocks being hoarded. The good news is that, eventually, speculation results in a market correction whereby prices return to a more sustainable level and the hoarded food eventually floods the market (which is bad for producers, but good for consumers). The bad news is that people may die of starvation while food remains hoarded by rich speculators.
3. There are supply problems. This means that the world's food producers are simply unable to grow enough food to meet demand. There may be specific reasons for this, including droughts or floods affecting crop yields. Mr Moon suggests that the creation of the bio-fuel market (whereby corn is grown by American farmers to be turned into ethanol and then added to gasoline) has reduced the supply of grain grown for food. This is one of the more popular reasons touted throughout the internet these days, but I am finding it to "trendy" to be believable - why would American farmers cause such major differences in international grain prices? Is the amount of food grown in America so massive as to affect the market in that way? Of course, another reason Mr Moon suggests is that global warming has reduced world-wide crop yields. This is a nightmare scenario which will result in massive malnutrition and starvation amongst the "bottom billion".
   

There is no doubt that more information is needed. Worldwide grain stocks need to be examined on a month by month basis in the same way as oil is being examined over at The Oil Drum. Grain production around the world needs to be mapped, showing which countries have had shrinking grain production, and which nations do not.

My suspicion is that global warming has already begun to bite and grain production is dropping because of world-wide environmental changes. That's only a suspicion, however, and I will happily change my opinion if the data contradicts me. I certainly hope it does.

Economic Production - Government vs private industry

I've been discussing the issue of government vs private industry over at Craig's blog and I posted some stuff that I thought might be good to share here.

Basically, goods and services can be produced in three ways:

1. Government
2. Private Industry
3. A combination of both Government and Private
   

Moreover, the funding for producing these goods and services is likewise broken up into three sources:

1. Government spending (raised through taxes)
2. User-pays (the market decides)
3. A combination of government spending and user-pays
   

In essence, there are nine possible variations:

i) Government owned and funded (planned)
ii) Government owned and funded by the market. (user pays)
iii) Government owned and funded by both government and the market.
iv) Privately owned and funded by the government.
v) Privately owned and funded (user pays).
vi) Privately owned and funded by both the market and government.
vii) Government and Privately owned, but funded entirely by government.
viii) Government and Privately owned, but funded entirely by the market.
ix) Government and Privately owned, and funded by both government and the market.

Ideology plays a big part in determining which sectors of the economy fit into the areas I have proposed above. Hardline Communism, espoused by Marx and Lenin, would have the entire economy fit into variation i). Conversely, free market loving, laissez-faire "drown government in the bathtub" small government types would have the entire economy fit into variation v).

Even when faced with inefficiency and clear evidence that a certain way of doing things may result in bad outcomes, adherents to these extreme ideologies will nevertheless argue that the price that must be paid for being ideologically pure is worth it.

This was the problem in the Soviet Union when it became clear that a centrally planned industrial sector did not provide a high enough quality of life for Soviet citizens. One of the debates that ensued in the late 1970s and early 1980s within the Soviet Communist party was whether it was better to, say, relax some communist rules and allow some private property or private businesses, or to keep the entire system ideologically pure. After all, if you allow the formation of a profit-making class, wouldn't that reverse the worker's revolution that they had fought for so long ago?

This is also the problem amongst "drown the government" types. One of the debates in the US at the moment is the state of the health care system which is dominated by the profit-making private sector, which gobbles up around 15% of GDP and results in health outcomes inferior to nations with universal health care. Would it be appropriate to, say, nationalise hospitals and health care in order to provide a taxpayer-funded universal health care system, or would it be better to have these inferior outcomes while remaining ideologically pure? After all, if you allowed universal health care, surely you are allowing the government more power, which is one step away from a descent into fascism and an Orwellian state?

Fortunately in a modern society such ideological purists are small in number, both on the left and on the right. My political position is simply one of pragmatism - whichever is the most efficient variation for a particular economic sector, that should be the variation chosen.

The reason why I italicised "for a particular economic sector" is that ideologues - even centrists - tend to lump the entire economy into one of the variations I have listed. Communists would argue for variation i) in everything, government drowners would argue for variation v) for everything, while ill-informed centrists might argue for variation ix) in everything.

The reality is that there are sectors of the economy which are best left alone by government, and there are sectors that are best left alone by private industry, and there are sectors of the economy which exist in between.

Rather than engaging in ideological battles, governments must seriously consider adjusting every single part of the economy to find out which variation is the most efficient and is the best for the majority of people.

Take public transport. In May 2006 I wrote two articles (here and here) that put the case forward for making public transport free. In other words, rather than charging people fares for walking into buses and trains, they travel for free, and the cost incurred in running public transport is borne through increased taxes. Why do this? Well, the argument I use is that there is a good chance that the total cost to the economy will be less if if it is completely funded by taxes, rather than having it funded by a user-pays system (as it is now). This needs to be explored.

No area of the economy should be untouched in this analysis. Food, clothing, housing, health care - all assumptions need to be questioned and all previous practices need to be critically examined. Moreover, objective, empirically-based testing needs to be done by government in order to make its final decision - rather than remaining ideologically pure.

I'm on record at this blog in arguing the case for public schooling. If it can be proven beyond reasonable doubt that the best outcomes would be met by having all schools privatised and charging parents full fees and having no government intervention at any level, then I'm all for it. But, then again, if the best way to produce more food at a high quality is for the entire agricultural industry to be nationalised and production determined by government planning, then I'd be all for that too. The key is not whether one or the other fits into my ideological stance, but whether the best and most efficient outcomes are met.

© 2008 Neil McKenzie Cameron, http://one-salient-oversight.blogspot.com/

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If celebs moved to Oklahoma

Click here.

Songs

I've been listening to some "new" songs recently which I've liked a lot. They all seem to have a common theme:

• Black Grease (The Black Angels)
• She's Lost Control (Joy Division)
• Falling Down (Chapterhouse)

Retiring Australian Cricketers

The following players have announced their retirement from cricket this season:

NSW - Matthew Nicholson.
SA - Matthew Elliott.
SA - Jason Gillespie.
SA - Darren Lehmann.
Qld - Jimmy Maher.
Qld - Michael Kasprowicz.
WA - Justin Langer.
WA - Brad Hogg.
WA - Adam Gilchrist.
WA - Matthew Inness.
Tas - Michael Di Venuto.

Time is running out for these blokes:

NSW - Stuart Macgill.
Qld - Andy Bichel.
Qld - Martin Love.
Tas - Daniel Marsh.

This photoshopped image has been shamelessly stolen from Something Awful.

What to do with the Coalition?

Brendan Nelson is proposing a merger:

Federal Liberal leader Brendan Nelson says there is a strong case for the party to merge with the Nationals.

Some National Party members say their support will be dependent on the creation of an entirely new federal party rather than a takeover.

The Nationals are doing their own review of the party's future.

On Sunday Dr Nelson raised the prospect of a merger, and has today told AM the parties have similar aspirations, but he is not rushing into anything.

"I am waiting, as is [Nationals leader] Warren Truss, for John Anderson's review to come forward," he said.

"We also know that there is a push in Queensland and at a state-based level for a merger between the National and the Liberal parties.

"My view is it needs to be federally or nationally led.

"It needs to one that's led by the organisational leadership and executive of our two parties."

One natural result of the 2007 election loss is that the coalition will, hopefully, never be the same again. Both parties suffered not only electoral defeats, but continued an unsustainable decline in support.

Of the two parties, it is the Nationals who are in serious trouble. As I pointed out in April 2007, the National Party is not national, which means that it is only getting votes from 3 of 6 Australian states. Moreover, the National Party managed to procure only 5.5% of the primary vote in the 2007 election, and has been suffering from a declining voter base ever since Pauline Hanson came along and permanently turned 3 out of every 8 National party voters against the party in 1998 (which I examine here).

The Liberals aren't doing well either. The last election saw 36.7% of the primary vote going to the Liberal Party. It's increasingly hard to argue that the Libs are an important political party when voters represent only a little more than one-third of the voting public.

Nelson's solution is to merge the two parties. I don't think that would work.

For starters, the two parties are very different. In essence, the two parties together as a coalition are similar to the US Republican Party, in that there are a mixture of libertarians, free-market lovers, (some) protectionists and (many) social conservatives.

The National Party, though, is the more socially conservative party. Drawing upon its traditional base of rural farmers, there is a natural moral conservatism within them. Moreover, I would also hazard a guess that the Nationals are very firmly planted in the Monarchist camp and wish to keep Queen Liz as our head of state.

The Liberal party is quite different, drawing upon the support of businesses and those from the higher socio-economic end of the spectrum. These supporters are urban and are more likely to support the idea of a Republic (which is obvious considering Malcolm Turnbull's prominence in the party). Moreover, while the party does have a number of social conservatives within it, they are not ascendant... yet.

Having said that, both parties are happy to espouse and practice conservative economic policies, which gives them their link.

I don't think the two parties should merge - the differences will be too great. There needs to be a better way, and that is for a "loosening" of the strings that bind the two together.

The most important step is for the National Party to truly become a national party and place candidates up for election in every seat in Australia. They should do this, even competing with the Liberal Party candidates that are there. Moreover, they can do this by promoting the dual message of economic and social conservatism. The Liberal party, on the other hand, can promoted themselves by being economically conservative and more socially liberal - after all, they are called the "Liberal" party for a reason. Because of their ties, each party would place the other second on the ballot paper, to ensure that one or the other party ends up being supported through the whole preferential process.

Having said all this, I would much rather Australia embrace Demarchy and the benefits that it offers. In the meantime, however, I would suggest that this would be a good way forward for both parties.

Bad news, good news

No school called me up for work today, but one school booked me for Wednesday, Thursday, Friday this week.

Spent this morning downloading Ghosts again, this time in FLAC format.

Meanwhile

The Stock Markets are heading towards Bear territory:

That's a five year graph of the Wilshire 5000, the broadest Share Market Index (each point is equal to $1 billion). (The graph is from the official Wilshire 5000 site).

For a bear market to be called, there needs to be a decline of 20% from the highest point that an index has reached. In this case, the Wilshire needs to decline to 12,645.35. It finished Friday on 13,052.35, so it's getting closer.

Simple mathematics and the US unemployment rate

Look, maybe I'm missing something here. I'm quite happy to be wrong about gut-feelings (as per my last post) but I'm not happy to be wrong when I could have done the work to prove myself wrong in the first place.

The unemployment rate dropped from 4.9% to 4.8%, but the amount of people out of work increased, thus spooking the markets only slightly. At issue here is the "participation rate", which decreased from 66.1% to 65.9%. This is the thesis argued by those at Angry Bear, who also point out that the employment to population ratio dropped as well (another way of measuring participation).

The problem here is with basic mathematics, so if anyone can correct me here I would oblige deeply.

First of all, the data:

1. Unemployment rate: 4.9% in January, 4.8% in February.
   
2. Participation rate: 66.1% in January, 65.9% in February.
   
3. Civilian Employment-Population Ratio.: 62.9% in January, 62.7% in February.
   

(The links above are to the data figures from the St Louis Fed)

Okay, so maybe I'm making an error here, but this is how I see it:

Is there a way to determine what the unemployment rate would have been if the participation rate or civilian employment-population ratio remained the same. Surely it would simply be a matter of a simple equation:

(February Unemployment Rate)
----------------------------------------- x (January Participation Rate)
(February Participation Rate)

So, in this case, it would be (4.8/65.9) x 66.1

Which equals 4.81%

A similar equation using the employment-population ratio comes up with the same result.

Again, maybe I've got this wrong. Can anyone help?